The Financial Conduct Authority (FCA) has fined Barclays £72m for failing to do due diligence and proper financial crime checks on a £1.88bn ($2.85m) transaction involving wealthy clients and politically exposed persons.
The failings relate to a transaction that Barclays arranged and executed in 2011 and 2012 for a number of ultra-high net worth clients. The clients involved were politically exposed persons (PEPs) and should have been subject to enhanced levels of due diligence and monitoring.
The regulator said the transaction involved no financial crime, but because it involved clients with PEP status it flagged up a higher level of risk and should have been treated accordingly. Rather than doing additional checks, Barclays applied a lower level of due diligence than its policies required for other business relationships of a lower risk profile. Barclays preferred instead to take on the clients as quickly as possible and thereby generated £52.3m in revenue, noted the FCA.
The transaction involved investments in notes backed by underlying warrants and third party bonds. It was the largest of its kind that Barclays had executed for individuals.
The FCA said Barclays went to unacceptable lengths to accommodate the HNWIs, and chose not to press them for required information "because it did not wish to inconvenience the clients". Barclays also agreed to keep details of the transaction strictly confidential, even within the firm, and agreed to indemnify the clients up to £37.7m in the event that it failed to comply with these confidentiality restrictions.
Few people knew of the existence and location of the firm's due diligence records which were kept in hard copy and not on Barclays' systems, the FCA said in a statement.
Mark Steward, director of enforcement and market oversight at the FCA said: "Barclays ignored its own process designed to safeguard against the risk of financial crime and overlooked obvious red flags to win new business and generate significant revenue. This is wholly unacceptable."